Not long after the financial crisis began ..

a local Deep Creek real estate agent suggested that those who had invested in Deep Creek real estate were far better off than those who invested in the stock market. I've previously challenged such statements as ignoring reality and/or blatantly misleading. Here is one such example from early 2009 (and if that one were updated today the difference would be even greater).

Today, however, I want to take a different approach. For years these agents essentially said stock market gains were uneven and unpredictable, but Deep Creek real estate was a sure thing, so forget about those mutual funds, index funds, and stocks and buy Deep Creek real estate (for those Charlie Brown fans, the comedy is clear). A lakefront property currently on the market was purchased in 2006, so you might ask how did this investment that agents and their marketing machines sold as a path to untold riches perform versus regular stock market investments over the same period (2006 to present)? Great question!!

Here's the property: 486 HAZELHURST Ln which some of you may recognize from the 2010 Deep Creek distressed properties list. June 2006 sold price: $799,000; current list price: $599,000; 5-year return: -25% (assuming all cash purchase which we know this one wasn't, so any loan only magnifies the loss). Since this one was foreclosed on we know the 2006 buyer lost at least 100% of his initial investment.

Now consider the case where the former owner of this property ignored the advice of local agents and instead invested $2,000 in a total market stock index fund (SPY) at the beginning of every month since June 1, 2006; thereby spreading out his/her investment over the ups and downs of the stock market and real estate cycles. Today, he/she would have more than $139,000 or a return on investment of 18% (without using leverage or risking his/her financial future by borrowing a large sum of money to acquire a speculative investment). There wouldn't even be a few pennies left if the same $118,000 were used as a down payment on this Deep Creek lakefront home.

Don't let the real estate agents fool you. They'll say people lost everything in the stock market and wish they would have invested in real estate instead. This example clearly shows the upside of steady, consistent investments as opposed to taking the advice of a real estate salesman on an all-in gamble at or near the peak of the market.

Don't forget to check back to Dan's Deep Creek Blog for your future updates on Deep Creek real estate statistics.